Win, Lose, or Draw?

Charities bet on the public’s love of poker, raising funds and ethics issues

When its rented headquarters in downtown Manchester, N.H., was torched by an arsonist nearly three years ago, On the

Road to Recovery, a mental-health charity, was faced with a hefty bill. Not only did the group need to replace thousands of dollars’ worth of equipment, but it also needed a new building, which was twice as expensive to lease as its previous home. With its state funds fixed at $175,000 per year, the group was so squeezed that it considered closing its doors.

After mulling over her options, Andrea Tinkham, the group’s executive director, came up with an answer to the charity’s money troubles: gambling.

First, the organization held several bingo nights, which brought in $15,000 last year. Then Ms. Tinkham and the private company that runs the charity’s bingo events decided to try cashing in on a national craze.

Experts believe that about 100 million Americans regularly play poker — about twice as many as two decades ago, says Stan Sludikoff, editor of Poker Player, a national newspaper published in Los Angeles.

With several tournaments televised each week, stoking the game’s popularity, On the Road to Recovery tried holding its own poker events. So far, the decision has paid off, yielding the organization $25,000 last year — enough to keep it in business.

“It’s been hard work, but it’s been worth it,” Ms. Tinkham says. “We’re a small operation, so we don’t have the budget to undertake major fund-raising efforts. There’s really no other way we could raise that much money.”

Taking a Gamble

The charity’s success at turning wagers into charitable dollars has been emulated by several other charities in New Hampshire. Across the country, many organizations have begun holding tournaments or accepting money from winning poker players. But in doing so, charities are entering a thicket of legal and moral concerns that, some experts say, may make poker tournaments too much of a gamble. Some large organizations, fearful of the negative associations some people have with games of chance, have steered clear of holding events.

What’s more, many charities that have gotten into the gambling business are signing deals with for-profit tournament organizers, some of whom return 50 percent or less of the money collected at an event to the charity.

“The biggest problem we’re seeing is that most organizations don’t have the expertise to run poker events, so they are hiring third parties to run them for them,” says Paulette V. Maehara, president of the Association of Fundraising Professionals, a trade group in Alexandria, Va. “Some of these third parties charge from 15 to 75 percent of the take. Much of the time, what they charge is just too much.”

State Regulations

As more nonprofit groups make inquiries to state charity officials about the legality of holding poker nights, legislators in several states have begun to draft measures that declare whether charities can sponsor the events. Some legislative bodies, such as the New Hampshire General Court, are considering taxing the proceeds of charity poker tournaments. A measure there currently in committee may come before the full body before the session ends later this month.

State charity regulators say the poker craze — in particular the popularity of the game known as Texas hold’em, in which players match a pair of cards in their hands with any combination of five common cards that are flipped face up on the table — has increased their workloads.

“We’re literally inundated with calls about Texas hold’em tournaments and how organizations can run them,” says Ross L. Laybourn Jr., the chief charitable investigator for Oregon. “My staff takes multiple calls daily.”

The Oregon legislature heeded calls from Mr. Laybourn’s office to look into charities and poker. Last month, the legislature passed a bill allowing charities to stage Texas hold’em tournaments.

In New Hampshire, the Office of Charitable Trusts says inquiries from charities considering holding poker tournaments rose by 50 percent last year compared with 2003. “In 1997, we might have gotten five to six calls per month about holding events involving games of chance,” says Audrey Blodgett, a paralegal for the Office of Charitable Trusts. “We get that many in a week now.”

‘Crazy About These Games’

While charity poker is illegal in many states, charities have used exceptions to anti-gambling laws to sponsor casino-style gaming events, which sometimes include poker tournaments. Whether they are called “casino nights,” “Monte Carlo nights,” or “bazaar nights,” the fund-raising events can give organizations a quick infusion of cash in return for a small investment in time.

Kid One Transport, a charity in Birmingham, Ala., that takes pregnant women and needy children to their medical appointments, has held two poker tournaments in the past six months, earning $10,500.

To put on the tournaments, Kid One Transport must follow stipulations that are typical of those found in several states that allow charities to hold one-day-only gambling events: The tournament must be staffed by the charity, and prizes are awarded instead of cash.

Kid One Transport has also taken steps to minimize a player’s prospective losses. Players pay a charitable donation of $35 for a cup of chips. Once players lose all of their chips, they cannot buy their way back into a game. Prizes, such as dinners at local restaurants or tickets to a Broadway show in New York, are usually donated. “Our costs are pretty minimal,” says Holly Shepherd Lollar, spokeswoman for Kid One Transport. Besides cards and rented tables, she says, “we might only have to buy some snacks for our volunteers.”

One of the charity’s volunteers, Joey Longoria, says the events have been very successful. “We capped the last tournament in January at 144 people, but we still had 20 people on the waiting list who showed up to see if they could play,” he says. The charity plans to hold a tournament every three months for the foreseeable future, Mr. Longoria adds: “We’ll continue to do them while this craze is still going. People are crazy about these games.”

But some groups have found poker to be a bad gamble. The Muscular Dystrophy Association of Greater Rochester and the Finger Lakes, in upstate New York, made arrangements to hold a poker tournament in January. The organization hoped to raise $10,000, but it never got the chance.

“We had strong interest — about 100 people had registered,” says Sally A. Cramer, the charity’s district director. After consulting with a local district attorney and the state police, as the organization was told to do by state officials, the group was ready to run the tournament — with the help of professional card dealers — and document all of the financial transactions surrounding it.

“We thought we were in compliance with the law,” Ms. Cramer says. But the organization was forced to cancel the tournament two days before it was to be held after the New York attorney general’s office said that the charity would need a license to run poker games and that the state would not grant one.

“It was very frustrating for us,” says Ms. Cramer. “You’re always trying to come up with a new and fresh idea. We thought we really had something here — an exciting fund raiser put on by an established charity and for a good cause. Now, we have to figure out what else we can do.”

Money vs. Mission

Partly out of legal concerns, some organizations accept charitable donations linked to poker tournaments but do not run them. The Cancer Research and Prevention Foundation, in Alexandria, Va., earned $40,000 from poker events last year. But the organization, which doesn’t employ paid fund raisers, has made sure to steer clear of managing the events or paying a fee to those who do.

“We’d never get involved in them to that level — not that we see anything wrong with poker events,” says Jan Mahrer, the foundation’s executive vice president.

One of the group’s events was organized and managed by Phil Gordon, a professional poker player who is a co-host of the Bravo cable-television show Celebrity Poker Showdown. Mr. Gordon is also a member of the cancer foundation’s board.

Ms. Mahrer says it is important for organizations such as hers to make sure that everything about the tournaments is not only legal, but also ethical. Organizations that benefit from poker, she says, should ensure that noncash prizes are given and that a nonprofit group doesn’t invite scrutiny because of its association with a less-than-reputable fund-raising organization.

“Even when charities hold raffles, there are too many questions that can come up about how the money was handled,” she says. “We insist that we review every piece of paper that our name is put on, including promotional materials, so we can approve it. When someone approaches us about doing an event that involves us, we look at who they are and what they’re doing.”

An organization’s reputation ought to be foremost in the minds of charity leaders, says Ms. Maehara, of the Association of Fundraising Professionals. “We tell charities to read the fine print, to make sure what the costs are, and to think about whether getting involved with poker is worth it,” she says.

Some charities receive third-party donations from gambling operations — even without authorizing the use of their names beforehand. The American Red Cross, in Washington, has received $1,287 since February 2003 from a Web site called betoncharity.com. After being contacted by The Chronicle, however, the charity said it has decided not to accept further donations from the online site, which encourages gambling.

The American Red Cross was deleted from the Web site’s list of organizations in late April, says Kara Bunte, a Red Cross spokeswoman.

The organization also discourages its chapters from holding events that involve gambling. It “does not view gaming as a stable and reliable source of revenue,” says Ms. Bunte. (Betoncharity.com, which does not include its phone number on its Web site, did not respond to e-mail messages requesting comment.)

The question of entangling a charity’s mission with gambling becomes an especially thorny one for organizations that serve children, Ms. Maehara adds. “It’s a perception issue,” she says. “Do you want young people to think gambling is OK? Is it something charities should be promoting? The morality question is a big one.”

Kid One Transport has received angry phone calls about its sponsorship of poker tournaments, but the charity has been able to explain to callers that the organization is running the events and that they are for a good cause, says Ms. Lollar. “We tell them we get the proceeds with very little cost, and they seem satisfied with that,” she says.

Other charities around the country that serve children also have accepted money donated by poker players and tournaments. For example, the actors Fred Savage and Fred Willard each gave Children’s Hospital Los Angeles $5,000 last year after the two participated in separate celebrity poker tournaments.

“We’re not condoning gambling,” says Steve Rutledge, a spokesman for the hospital. “We’re merely a charitable beneficiary of celebrity poker tournaments.” Gambling on poker is legal in California, he adds: “We don’t view it any differently than any other third-party donation.”

Large Groups Leery

But some large children’s organizations have decided that poker tournaments do not fit with their missions.

When a new for-profit partnership approached Save the Children, in Westport, Conn., and the U.S. Fund for Unicef, in New York, about becoming beneficiaries of an online tournament to aid children harmed by the tsunamis in South Asia, they declined. Even though the partnership — called the Pokerbook Gaming Corporation and run by Senticore, a holding company in Hollywood, Fla., and E.G. Associates, a consulting company in San Diego — promises to deliver 90 percent of the money collected from the tournament, minus prizes, to charities, the two organizations decided not to get involved.

The U.S. Fund for Unicef was intrigued by the Pokerbook corporation’s idea, but it didn’t fit in with the organization’s mission — improving the lives of children, says Lisa G. Szarkowski, the charity’s spokeswoman.

“We don’t do work with companies that do gambling as part of their business,” she says. (The Pokerbook Gaming Corporation’s main business involves selling gambling software.) “It was more of a general consideration for us. We also don’t become involved with businesses that deal in alcohol, tobacco, or weapons.”

Gary Erickson, a principal at E.G. Associates, says that after making the first few inquiries for Pokerbook, it appears it will be more difficult for the new venture to garner big-name beneficiaries than it had anticipated.

“I’m afraid that one of the things we’ll see is that some charities will be restricted by their bylaws as to what they can become involved with,” Mr. Erickson says.

So far, Pokerbook has enlisted Feed the Children, in Oklahoma City, as a charity beneficiary for the event.

Charities’ Shares Vary

Although Pokerbook promises to return the vast majority of the money it raises to charities, a lack of national or state standards on how much third-party event holders can take in fees and expenses is troubling to some who monitor the activities of fund raisers.

Ms. Maehara says that charities need to be vigilant about how much profit they are willing to allow for-profit companies to take.

“You want the event to clearly be for charity and not for someone else’s benefit,” she says.

The New Hampshire legislature recently introduced a bill that would require poker-event holders to give charities at least 80 percent of the proceeds from tournaments that take in $1,000 or more.

Ms. Tinkham, of On the Road to Recovery, says she has no problem with the idea, though the company with which her organization splits proceeds down the middle has done nothing to make her think they aren’t worth what they make.

“There’s no way I could do it without these people,” she says.

Her organization’s mission doesn’t preclude it from making money from gambling, she says. “In our field, gambling is potentially addictive, so there is a conflict if we’re creating addicts,” says Ms. Tinkham, who has been known to post Gamblers Anonymous signs on the walls of the bingo halls that hold the organization’s poker tournaments. “But the bottom line is we needed more money just to keep going. We weighed the small risk of addiction against that and decided to hold these tournaments.”

Without the proceeds from the 10 poker nights On the Road to Recovery holds each year, she would have to cut several training programs as well as services that aim to help mentally ill people find homes and jobs in local neighborhoods.

But Ms. Maehara and others worry that charities may be selling themselves short. Major nonprofit groups steer clear of hiring for-profit companies because of possible conflicts and high costs, Ms. Maehara says.

“Smaller charities are drawn to these events because they don’t have to pay for all of the costs usually associated with starting up a fund-raising event,” adds Ms. Maehara. “But often, they’re not getting a good return on their investment.”

For her part, Ms. Tinkham is pleased that New Hampshire’s government is stepping up its oversight of charity poker events, which now compete with each other for players. She worries that opportunists may be trying to cash in.

“We need more regulation of this,” she says. “There are people who are taking advantage. We need to find out who’s a charity and who isn’t.”